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At the beginning of 2021, the price of beef and pork remain low. Cause 1. Soybeans are given a signal. Cause 2. The rupture of supply chains in 2020 led to reducing stocks. Cause 3. Demographic trends.
In the last quarter of 2020, the grain sector of the commodity market marked with a fair growth, by as much as 19%. Prices for soybeans, corn and wheat reached the highest in six years. From a technical point of view, the goods that the world are fed, broken up.
Grain is the necessary component of the human diet, but they also feed and animals that fall into factorys for processing or for dinner tables. The production of beef and pork depend on feed, which include grain and oilseeds.
In 2020, the animal protein markets faced unprecedented difficulties. Manufacturers and livestock rods suffered from low prices that have been told on the future markets. Consumers - Myathers collided with reverse: prices grew, and goods have become less.
Last year and manufacturers, and consumers of beef and pork experienced economic adversity. In the meantime, the consequences of the pandemic will likely continue to influence the prices of beef and pork and in 2021. If you focus on the behavior of prices on the grain markets, we can observe a significant increase in prices for meat futures in the coming months.
On Tuesday, January 12, the US Department of Agriculture issued the first in 2021 report on the forecasts of the harvest and the production of agricultural products by farm farms in the world. After his exit, the cereal prices rushed up.
In the early 2021, the price of beef and pork remain low
Prices for beef and pork did not survive such a takeoff as on cereals. January is an off-season demand for meat. During the year, the peak of the season is the period from May to September - the picnic season when the meat is fry - when the consumption of animal protein increases.
A source. All graphics provided CQG
On a monthly graphics of futures on a lively cattle, a bearish tendency is visible, since 2014, with the highest point of $ 1,71975 per pound. At prices for live cattle, such high ups and downs, the last lower point accounted for April 2020, the price was 81.45 per pound. The technical resistance falls on the peak of January 2020 and is equal to $ 1,2755 per pound. The movement above this level will mean the completion of a six-year-old bear trend in the livestock market. At the end of last week, the near futures contracts for live cattle were lower than $ 1.13.
A monthly futures schedule for fattening cattle shows that they have reached the highest point of $ 2.4480 in 2014. The fall in April 2020 to $ 1.0395 was caused by a global pandemic. Since then, the price of cattle on fattening is recovered, but to end a bear trend that is observed since 2014, it is necessary to exempter levels of $ 1.4640 and $ 1.4940. On January 15, the nearest futures for fattening cattle were traded below the level of $ 1.35.
As a monthly price schedule for pork shows, at a price below 70 cents per pound, pork futures are restored after a point below for eighteen years in 37 cents achieved in April. To complete the period of technical pressure in pork futures, it is necessary to excess levels of 80 and 94 cents. Last Friday, pork trading closed just above 68 cents.
There are three reasons that make me believe that the prices for beef and pork in the year 2021 will break up.
1. Soybeans give a signal
When animal cultivation, the main costs are feed. From the mid-2020, the prices for animal feed took off to heaven.
The monthly chart of soybeans shows that the price of this oilseed culture has grown from $ 8,0825 for the bushel in April 2020 to more than $ 14 at the end of last week. In early January, Soya was trading at the highest since June 2014. Soy - the main ingredient of animal feed.
Futures for soy flour last week grew from $ 278.80 in April to more than $ 460 per ton. Another ingredient of animal feed - corn.
The monthly graphics schedule for corn shows the rise of prices from $ 3 for bushel in April to the highest since July 2013. Prices of $ 5.40 per bushel last week.
Rising prices for components will speed up the rise in prices for the goods itself. Manufacturers of animal protein are faced with the rise of prices for food, passing in the season of peak demand of 2021.
2. The rupture of supply chains in 2020 led to reducing stocks
In 2020, a decline in activity and closure of processing factories due to a global pandemic caused low prices for livestock breeders and high prices for consumers. With the closure of the processing factories in livestock breeders, many animals accumulated. After the economic difficulties of 2020 and in the face of high prices for feed in 2021, livestock rods, most likely reduce the livestock. At the same time, high prices for feed will lead to the fact that the animals at the factory will be delivered to the less fattened, which will affect the supply of meat.By the beginning of the picnic season at the end of May and during the summer months, vaccines will help create a collective immunity to COVID-19. In the summer of 2021, compared with the 2020th, there will be many meetings in the fresh air, parties, trips to kebabs, etc., which will increase the demand for meat. Gap supply chains in 2020, the rise in prices for feed and return to normal to some extent life later this year can create a perfect bullish trend for beef prices and pork.
3. Demographic trends
Finally, demographic trends will continue to support the demand for all goods, and meat will not be an exception. At the beginning of this century, six billion people lived on Earth. Twenty-one years later, the US Census Bureau reports that this number has increased by more than 28.9% and is 7.736 billion.
Most of the population of the planet uses meat. Demography continues to increase the demand for meat. And although the price trend over the past six years was a bearish, he was opposed to the past two decades.
Quarterly schedule shows a common bear pricing model in a cattle market from 2000 to 2014. Since then, the market has been observed mainly by the price of consolidation.
Quarterly chart of futures for fattening cattle displays the same model with a higher price at the correction points.
Over the past six years, the consolidated price of pork has been observed for the last six years in a quarterly chart. The effect of demographics on the markets of meat futures over the past two decades was mostly bullish.
If the change in grain prices is an indicator, we should wait for a breakthrough price of beef and pork, rather earlier than later.
The risky meat futures are offered at the Chicago Commodity Exchange. Over the coming months, Subindex iPath® Series B Bloomberg Livestock Subindex Tooth Return (NYSE: COW) must follow the price of meat.